Bears Spoil Rally: Dave's Daily

Wednesday was a stinker. There was widespread selling in all asset classes except for U.S. bonds. Much of this selling may have been due to year-end tax selling; a break in support levels for the euro; much weaker commodities especially in precious metals, and more worries about the health of the U.S. economy, corporate earnings and...you guessed it...the eurozone.

Gold and silver losses have become more severe. In addition to tax loss selling there may be large redemptions occurring with hedge funds and the unique "mark to market" tax issues affecting commodity markets. In this case, even if the position isn't sold, 60% of long positions are treated as long-term gains with the balance as ordinary income.

The market is also rumor prone with volume still light. Most rumors Wednesday revolved around the eurozone where euro flight to offshore havens was much discussed. Further more investors are beginning to recognize the previous eurozone fix wasn't much of a fix at all. Rather it just bought some time. The focus remains on Italy where Italian debt needs to be sold, not just this week, but repeatedly. Investors are worried about collateral being put up for loans. Pay attention to this is the watchword.

Like most, we've been busy rearranging our portfolio allocations and strategy for the coming year; hence, no posting yesterday. As Yogi Berra once said: "The future ain't what it used to be." Amen to that! This makes strategies for 2012 more challenging than ever but we press ahead.

Volume remains light making it easier for bears and bulls to push indexes around. Breadth per the WSJ was quite negative reversing some short-term overbought conditions.

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SPY - The SPDR® S&P 500® ETF is a fund that, before expenses, generally corresponds to the price and yield performance of the S&P 500 Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs. See more details

IWM - The iShares Russell 2000 Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the small capitalization sector of the U.S. equity market as represented by the Russell 2000 Index. The index represents the approximately 2,000 smallest companies in the Russell 3000 Index. See more details

QQQ - PowerShares Capital Management LLC is passionate about our goal of delivering the highest quality investment management available through one of the more benefit-rich investment vehicles ever created, the exchange-traded fund.PowerShares QQQ¿, formerly known as "QQQ" or the "NASDAQ- 100 Index Tracking Stock®", is an exchange-traded fund based on the Nasdaq-100 Index®. See more details

Continue to U.S. Sector, Stocks & Bond ETFs

KBE - The SPDR® S&P® Bank ETF, before expenses, seeks to closely match the returns and characteristics of the S&P® Banks Select Industry Index (ticker: SPSIBK). Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs. See more details

KRE - The SPDR® S&P® Regional Banking ETF, before expenses, seeks to closely match the returns and characteristics of the S&P® Regional Banks Select Industry Index(ticker: SPSIRBK). Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs. See more details

XLF - The Financial Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Financial Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs. See more details

XLB - The Materials Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Materials Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs. See more details

XLI - The Industrial Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Industrial Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs. See more details

XRT - The SPDR® S&P® Retail ETF seeks to replicate as closely as possible, before expenses, the total return performance of the S&P Retail Select Industry® Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs. See more details

IEF - The iShares Barclays 7-10 Year Treasury Bond Fund seeks to approximate the total rate of return of the intermediate-term sector of the United States Treasury market as defined by the Barclays Capital U.S. 7-10 Year Treasury Bond Index. See more details

TLT - The iShares Barclays 20+ Year Treasury Bond Fund seeks to approximate the total rate of return of the long-term sector of the United States Treasury market as defined by the Barclays Capital U.S. 20+ Year Treasury Bond Index. See more details

Continue to Currency & Commodity Market ETFs

UUP - The PowerShares DB US Dollar Bullish Fund (Symbol: UUP) is based on the Deutsche Bank Long US Dollar Index (USDX®) Futures Index¿ (DB Long USD Futures Index). The Index, which is managed by DB Commodity Services LLC, is a rules-based index composed solely of long USDX® futures contracts. The USDX® futures contract is designed to replicate the performance of being long the US Dollar against the following currencies: Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc. See more details

FXE - CurrencyShares Euro Trust is designed to track the price of the euro net of Trust expenses, which are expected to be paid from interest earned on the deposited euros. See more details

FXB - CurrencyShares British Pound Sterling Trust is designed to track the price of the British Pound Sterling net of Trust expenses, which are expected to be paid from interest earned on the deposited British Pound Sterlings. See more details

FXS - CurrencyShares Swedish Krona Trust is designed to track the price of the Swedish Krona net of Trust expenses, which are expected to be paid from interest earned on the deposited Swedish Kronor. See more details

GLD - The objective of the SPDR® Gold Trust¿ is for the Shares to reflect the performance of the price of gold bullion, less the Trust's expenses. See more details

GDX - The Gold Miners ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the NYSE Arca Gold Miners Index. The Index provides exposure to publicly traded companies worldwide involved primarily in the mining for gold, representing a diversified blend of small-, mid- and large- capitalization stocks. As such, the Fund is subject to the risks of investing in this sector. See more details

SLV - The objective of the iShares Silver Trust is for the value of the shares of the iShares Silver Trust to reflect, at any given time, the price of silver owned by the iShares Silver Trust at that time, less the iShares Silver Trust's expenses and liabilities. See more details

JJC - The Dow Jones-UBS Copper Subindex Total ReturnService Mark is a sub-index of the Dow Jones-UBS Commodity Index Total ReturnService Mark and reflects the returns that are potentially available through an unleveraged investment in the futures contracts on physical commodities comprising the index plus the rate of interest that could be earned on cash collateral invested in specified Treasury Bills. See more details

DJP - The iPath® Dow Jones-UBS Commodity Index Total ReturnService Mark ETN is linked to the Dow Jones-UBS Commodity Index Total ReturnService Mark and reflects the returns that are potentially available through an unleveraged investment in the futures contracts on physical commodities comprising the index plus the rate of interest that could be earned on cash collateral invested in specified Treasury Bills. The commodities represented in the Dow Jones-UBS Commodity Index Total ReturnService Mark are rebalanced annually; however, the weightings fluctuate between rebalancings due to changes in market prices. See more details

DBA - The PowerShares DB Agriculture Fund is based on the Deutsche Bank Liquid Commodity Index Diversified Agriculture Excess Return¿ and managed by DB Commodity Services LLC. The Index is a rules-based index composed of futures contracts on some of the most liquid and widely traded agricultural commodities. The Index is intended to reflect the performance of the agricultural sector. You cannot invest directly in the Index. Ordinary brokerage commissions apply. See more details

JJG - The Dow Jones-UBS Grains Subindex Total ReturnService Mark is a sub-index of the Dow Jones-UBS Commodity Index Total ReturnService Mark and reflects the returns that are potentially available through an unleveraged investment in the futures contracts on physical commodities comprising the Index plus the rate of interest that could be earned on cash collateral invested in specified Treasury Bills. The Index is currently composed of three futures contracts on grains traded on U.S. exchanges. See more details

JO - The Dow Jones-UBS Coffee Subindex Total ReturnSM is a sub-index of the Dow Jones-UBS Commodity Index Total ReturnSM and is intended to reflect the returns that are potentially available through an unleveraged investment in the futures contracts on physical commodities comprising the index as well as the rate of interest that could be earned on cash collateral invested in specified Treasury Bills. The Dow Jones-UBS Coffee Subindex Total ReturnSM is a single-commodity sub-index currently consisting of one futures contract on the commodity of coffee, which is included in the Dow Jones-UBS Commodity Index Total ReturnSM. See more details

USO - The United States Oil Fund, LP ("USO") is a domestic exchange traded security designed to track the movements of light, sweet crude oil ("West Texas Intermediate"). See more details

UGA - The United States Gasoline Fund LP (UGA) is an exchange traded security that is designed to track in percentage terms the movements of gasoline prices. See more details

XLE - The Energy Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Energy Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs. See more details

Continue to Overseas Sectors & ETFs

EFA - The iShares MSCI EAFE Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the European, Australasian and Far Eastern markets, as measured by the MSCI EAFE Index. See more details

EZU - The iShares MSCI EMU Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the European Monetary Union (EMU) markets, as measured by the MSCI EMU Index. See more details

EEM - The iShares MSCI Emerging Markets Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in emerging markets, as represented by the MSCI Emerging Markets Index. See more details

EWJ - The iShares MSCI Japan Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Japanese market, as measured by the MSCI Japan Index. See more details

EWA - The iShares MSCI Australia Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Australian market, as represented by the MSCI Australia Index. See more details

EWG - The iShares MSCI Germany Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the German market, as measured by the MSCI Germany Index. See more details

EWI - The iShares MSCI Italy Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Italian market, as measured by the MSCI Italy Index. See more details

EWZ - The iShares MSCI Brazil Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Brazilian market, as measured by the MSCI Brazil Index. See more details

RSX - The Russia ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the DAXglobal® Russia+ Index. The Index provides exposure to publicly traded companies that are domiciled in Russia, and traded in Russia and/or on leading global exchanges. As such, the Fund is subject to the risks of investing in this country. See more details

EPI - WisdomTree India Earnings Fund seeks investment results that correspond to the price and yield performance, before fees and expenses, of the WisdomTree India Earnings Index. See more details

FXI - The iShares FTSE China 25 Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE China 25 Index. See more details

The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.

The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.

The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.

Continue to Concluding Remarks

There isn't much to say on a light volume, rumor driven trading day. Jobless Claims, Chicago PMI and Pending Home Sales are due Thursday but my sense of economic conditions really won't seem viable until February's data is in hand.

That's it for this mixed-up day but some serious damage was done in some sectors particularly in commodities.

The charts and comments are only the author's view of market activity and aren't recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren't predictive of any future market action rather they only demonstrate the author's opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at www.etfdigest.com.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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